NISM Series XA Investment Adviser Level 1 Certification Demo Test

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NISM SERIES X A : INVESTMENT ADVISER (LEVEL 1)
CERTIFICATION DEMO TEST
Question1 The investments in Kisan Vikas Patra do not enjoy any tax incentives - State whether True or
False?
(a) True
(b) False
Correct Answer True

Answer In Kisan Vikas Patra - There is no tax incentive for the investment made and the interest earned is
Explanation taxed on accrual basis.
Question2 A person has garnered sufficient corpus for his retirement. He is in the distribution stage of
retirement. Recommend an annuity to him.
(a) Semi variable annuity
(b) Immediate life annuity
(c) Deferred life annuity
(d) Variable annuity
Correct Answer Immediate life annuity

Answer Explanation There are two distinct stages in retirement: the accumulation stage and the distribution stage.
The accumulation stage is the stage at which the saving and investment for the retirement
corpus is made.
The distribution stage of retirement is when the corpus created in the accumulation stage is
employed to generate the income required to meet expenses in retirement. In this stage the
retired person needs to have funds immediately and on a regular basis to meet his expenses.
In an immediate annuity the annuity payments begin immediately on purchasing the annuity
(policy).
This study source was downloaded by 100000764701401 from CourseHero.com on 03-23-2023 20:07:37 GMT -05:00
Question3 A call option is likely to be exercised if ______ .

(a) Strike price is higher than market price
(b) Market price is higher than strike price
(c) Premium moves down
(d) Market moves down
Correct Answer Market price is higher than strike price

Answer Explanation The buyer of the call option exercises his right if on the specified date the strike price is lower
than the market price (spot price) of the security. ( Its a profitable trade)
[The buyer of put option exercises the right if on the specified date the strike price is higher
than the market price (spot price) of the security]
Question4 While determining the Retirement Corpus, which of these is/are variables in this
calculation?
(a) Expected rate of inflation
(b) Rate of return expected to be generated by the corpus
(c) Period of retirement
(d) All of the above
Correct Answer All of the above

Answer Explanation The variables in this calculation are :
• The periodic income required • The expected rate of inflation • The rate of return expected to
be generated by the corpus • The period of retirement, i.e. the period for which income has to
be provided by the corpus.
Question5 The Risk free rate of return which is usually used is ______ .
(a) Short term bank deposit rate
(b) 91 day treasury bill rate
(c) Bank prime lending rate
Correct Answer 91 day treasury bill rate

Answer Explanation The risk-free rate of return is the interest rate an investor can expect to earn on an investment
that carries zero risk.
In practice, the risk-free rate is commonly considered to equal to the interest paid on a 3-month
(91 day) Government Treasury bill.
Question6 Which of these documents is usually attached with the Key Information Memorandum?
(a) Fund Fact Sheet
(b) Application Form
(c) Scheme Information Document (SID)
(d) Statement of Additional Information (SAI)
Correct Answer Application Form

Answer Explanation The application form for the NFO is available along with the Key Information Memorandum
(KIM).
KIM gives important information about the scheme and procedures for investing.
Question7 The pension received under the National Pension System depends on ______ .
(a) the income required in retirement
(b) the annuity bought
(c) the amount as decided by the employees
(d) the last salary received
Correct Answer the annuity bought

Answer Explanation The NPS is a defined contribution scheme launched in May 2009 by the Government of India for
all citizens on a voluntary basis. The contributions made by an individual to the fund are
managed to create a retirement corpus. The higher the contribution (annuity purchased),
higher will be the pension amount.
Question8 In a Public Provident Fund (PPF) account, when is the first withdrawal allowed?
(a) From the 5th financial year
(b) From the 6th financial year
(c) From the 7th financial year
(d) From the 9th financial year
Correct Answer From the 7th financial year

Answer Explanation In a PPF account, one withdrawal in a financial year is permissible from seventh financial year.
Question9 Corporate bonds with high credit rating ______ .

(a) Have higher coupon
(b) Have higher face value
(c) Have lower default risk
Correct Answer Have lower default risk

Answer Explanation Bonds with the highest credit rating are considered to have the highest level of safety with
respect to repayment of principal and periodic interest and these bonds have low risk of default
by the bond issuer in matter of payment of principal and interest.
Question10 The Government of India can raise money by issuing Commercial and Securitized papers -
State whether True or False?
(a) True
(b) False
Correct Answer False

Answer Explanation Corporates, Banks, Financial Institution and Non-Banking Finance Companies (NBFCS) raise
funds by issuing equity shares, preference shares, bonds, convertible bonds, commercial
paper, certificates of deposits and securitized paper.
Governments raise funds through government securities (G-Sec). Such securities are short term
(usually called treasury bills with original maturities of less than one year) or long term (usually
called Government bonds or dated securities with original maturity of one year or more).
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This study source was downloaded by 100000764701401 from CourseHero.

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Correct Answer True

Correct Answer Immediate life annuity

Question3 A call option is likely to be exercised if ______ .

Correct Answer Market price is higher than strike price

Correct Answer All of the above

Correct Answer 91 day treasury bill rate

Correct Answer Application Form

Correct Answer the annuity bought

Correct Answer From the 7th financial year

Question9 Corporate bonds with high credit rating ______ .

Correct Answer Have lower default risk

Correct Answer False

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